Bosanac and Commissioner of Taxation (Taxation)

This matter concerned an application for review of the Commissioner of Taxation's decision regarding the Applicant's tax liability for the income year ended 30 June 2013. The core dispute revolved around the Commissioner's amended assessment, which increased the Applicant's taxable income and imposed a shortfall penalty of 95%. The Applicant contended that the amended assessment was incorrect concerning the cost base of a capital gains tax calculation and the imposition of the penalty. The application was heard by Deputy President Boyle of the Tribunal.

The Tribunal was required to determine four fundamental issues. Firstly, whether a claimed payment of $124,000 for commission or fees constituted an "incidental cost" for the purposes of section 110-35 of the Income Tax Assessment Act 1997 (Cth). Secondly, the Tribunal needed to ascertain whether a Mr Thompson was acting as the Applicant's agent. Thirdly, it was to consider whether the base penalty amount, as determined under section 284-90(1)(a) of the Taxation Administration Act 1953 (Cth), was excessive. Finally, the Tribunal had to determine if an increase in the base penalty amount, pursuant to section 284-220(1)(a) of the Taxation Administration Act 1953 (Cth), was justified.

The Tribunal considered the legislative framework, particularly sections 110-25 and 110-35 of the Income Tax Assessment Act 1997 (Cth), which outline the elements of a CGT asset's cost base, including incidental costs. The Applicant had purchased an investment property in 2000 and sold it in 2013. The Commissioner's amended assessment arose from an examination of the Applicant's tax affairs, which included capital gains on properties sold. The Applicant's tax return for the relevant year was due in October 2013, and the Commissioner had issued notices to lodge returns and a notice of intention to audit in early 2014, requesting information on capital gains tax. The Applicant did not return the questionnaire provided by the ATO. The Tribunal's decision would address the deductibility of the claimed fee as an incidental cost and the appropriateness of the penalty imposed.